Euro Area Manufacturing: Germany strong, France weak
August data PMI survey data show a further expansion of the Euro Area manufacturing sector, as continued growth in Germany, Italy, Spain, the Netherlands, Austria and Ireland offset the ongoing contractions in France and Greece.
At 52.3 in August, the final seasonally adjusted Euro Area Manufacturing PMI (Purchasing Managers' Index) was only a shade below its earlier flash estimate and July’s final posting (both 52.4).
Markit, the London-based index firm, said that the average PMI reading so far in the third quarter (52.4) is, however, slightly above that for quarter two (52.3). Euro Area manufacturers reported further solid expansions of production and new business, with rates of increase improving to the quickest since May 2014 and April 2014 respectively. Demand improved in both domestic and export markets*, as highlighted by a solid and accelerated increase in new export business. This supported further job creation, as companies raised employment at the quickest pace in four years. Increases in staffing also reflected rising pressure on capacity. Backlogs of work rose for the fourth month running, and to the greatest extent since April of last year.
National survey data signalled that only one nation, Germany, saw improved rates of expansion for both production and new orders. This was underpinned by the fastest expansion of new export business in one-and-a-half years and the steepest job creation since January 2012.
Output growth also improved in Spain, despite slower increases in both new orders and new export business. Italy, the Netherlands, Austria and Ireland also all registered higher levels of production and new orders, although rates of expansion were slower across the board. Employment rose in Italy, Spain, the Netherlands and Ireland, but fell slightly in Austria.
The weakest performer remained Greece. Greek manufacturers continued to report steep reductions in output, new orders, new export business and employment, but the rates of contraction all slowed sharply from the multi-year and record rates signalled in July. France reported accelerated falls in output, new orders and employment.
Average output prices at Euro Area manufacturers rose slightly for the fourth time in the past five months in August. Selling prices increased in Germany, Italy and the Netherlands, but were lowered in the other nations covered by the survey. In contrast, average input costs fell for the first time in six months, mainly centred on Germany and Italy – with Germany in particular reporting lower energy prices. Although all of the other nations covered by the survey reported increased purchasing costs, rates of inflation were slower than in July.
*Including intra-Euro Area trade.
Rob Dobson, senior economist at Markit said: “The Euro Area manufacturing sector showed continued resilience in August, with output growth and inflows of new business both strengthening. Based on the historical relationship, the PMI is tracking at somewhere close to a 2% annualised increase in industrial production so far in the third quarter, a modest gain but still representing a positive step forward.”
“The job numbers are also looking more positive, with employment rising at the fastest pace in four years. On the inflation front, lower oil prices led to the first dip in input costs since February, while selling prices remained close to stagnation.
“By nation, the Netherlands, Italy and Ireland remained the most impressive performers. Although there were signs of manufacturing growth cooling in these countries, this was largely offset by a solid acceleration in Germany, suggesting that the region’s industrial powerhouse is taking on more of the growth strain.
“Given the ongoing situation in Greece it was not surprising to see that nation’s manufacturing sector register a further sharp downturn, although a sharp slowing in the rate of contraction raises hopes that the lowest point has been passed. The French industrial sector also remains in the doldrums and is likely to continue to act as a drag on the broader French economy.
“While there remain pockets of strength in a number of national domestic markets, August also saw signs of that being matched by a step up in export demand. Export order inflows rose at a faster pace, although we will have to wait and see if recent concerns regarding a slowdown in China filter through to the figures in coming months.”